Quitting Work And Spending Cash (The Poll)

[wish I could afford one]

I was actually surprised (although I don't know why given the savviness and awareness of so many HPC'ers) at the number of us who had either retired early or were planning to retire early in this great thread.

We're of course all very different and chasing different things so I thought it could be interesting to get a view on just how much wealth we think we need to pull the trigger and quit work.

I've been pretty transparent previously and believe I need £1,000,000. If I stay in the UK I plan to use £350,000 of that to buy some land outside of the South East onto which I'll build a small oak framed home for my family. The remaining £650,000 will be drawn down annually at the rate of 2.5% giving me a very healthy £16,000 or so to live off (including home maintenance and small car depreciation)

[council dweller]

£70.000.

[StainlessSteelCat]

Not really sure tbh. I have a house, and some savings (both pension and cash). I'd like to retire at/before 55, but not sure how big a fund I need to pull in about £10K/year (adjusted) from 55 as missus and I can comfortably live on that.

[Frank Hovis]

I've included the house on the same basis as you suggest for final salary pension, 25x annual rent saved, as the value isn't practically relevant. It can double or halve in price without changing my circumstances.

[wish I could afford one]

Not really sure tbh. I have a house, and some savings (both pension and cash). I'd like to retire at/before 55, but not sure how big a fund I need to pull in about £10K/year (adjusted) from 55 as missus and I can comfortably live on that.

Personally, I'm planning on receiving £0 in State Pension. A lot of bloggers/people talk of the 4% Rule to calculate how much they need. For £10,000 excluding State Pension you'd need £250,000 (£250,000/4%) plus your home. Personally, I think that is way to bullish given life expectancies vs early retirement, UK residency etc. Instead I've used Wade Pfau's research and settled on a 2.5% Rule. Under this Rule you'd need £400,000.

Of course I know nothing, DYOR etc...

[wish I could afford one]

I've included the house on the same basis as you suggest for final salary pension, 25x annual rent saved, as the value isn't practically relevant. It can double or halve in price without changing my circumstances.

That would seem sensible and reasonable for someone who already owns. I've used home cost as I don't yet have one which will net straight off early in FIRE.

[sexton]

We retired in our mid 40's with £140k it lasted till our US social security payments started twenty years later.Building societies were paying 12.5% at the time!

[porca misèria]

Too ambiguous.

If you've reached state pension age and have a house you're happy with, you need nothing more. If you have to cover quite a few years before getting an income from the state, that's different.

And we all get greedier as we get richer. As in, wouldn't it be nice to be able to stay in a hotel room once in a while, or hire some little luxury like a boat or car? Gosh, now I'm rich I can do that ... get a glimpse of how the other half live. Damn, now I don't want to go back, I need that bigger pot.

[wish I could afford one]

...

And we all get greedier as we get richer. As in, wouldn't it be nice to be able to stay in a hotel room once in a while, or hire some little luxury like a boat or car? Gosh, now I'm rich I can do that ... get a glimpse of how the other half live. Damn, now I don't want to go back, I need that bigger pot.

I really hope I don't get to that situation and instead am brave enough to pull the Early Retirement trigger as soon as I have 'enough'. So far I've resisted the urge which means I'm currently able to save 55% of Gross earnings with HMRC getting the rump of the remainder.

[Frank Hovis]

I really hope I don't get to that situation and instead am brave enough to pull the Early Retirement trigger as soon as I have 'enough'. So far I've resisted the urge which means I'm currently able to save 55% of Gross earnings with HMRC getting the rump of the remainder.

Um, SIPP gives tax relief at top rate, VCT investment at 30%. Why not get your tax back if you have the cash to make the investments? VCT dividends are tax free and a SIPP these days is no more than a time-locked ISA accessible at age 55.

[wish I could afford one]

Um, SIPP gives tax relief at top rate, VCT investment at 30%. Why not get your tax back if you have the cash to make the investments? VCT dividends are tax free and a SIPP these days is no more than a time-locked ISA accessible at age 55.

Yep understand. Already hitting the SIPP/Company Pension hard and will likely add circa £40k this tax year. Don't want to go any more (could this year due to system quirk) for risk (of government tinkering) reasons and also need plenty of non-SIPP investments as I'll likely be retiring at age 43 (plus will need cash for a home).

Up until now just haven't needed to carry the risk associated with VCT's however I am getting pretty sick of the huge swathes of tax HMRC extracts from me so worth another look. Do you invest into VCT's? If yes, would be great to hear a little more of how you go about it.

[Frank Hovis]

PM sent.

[porca misèria]

Yep understand. Already hitting the SIPP/Company Pension hard and will likely add circa £40k this tax year. Don't want to go any more (could this year due to system quirk) for risk (of government tinkering) reasons and also need plenty of non-SIPP investments as I'll likely be retiring at age 43 (plus will need cash for a home).

Up until now just haven't needed to carry the risk associated with VCT's however I am getting pretty sick of the huge swathes of tax HMRC extracts from me so worth another look. Do you invest into VCT's? If yes, would be great to hear a little more of how you go about it.

My net investment in VCTs stands at £96925 (net of tax relief where applicable - most but not all my purchases). My income from VCTs this (calendar) year is £12670. Tax-free. Not a bad rate of return. A minority of them have proved big losers, but then so has Tesco.

And there's a nice capital gain too, though that's really just the tax relief.

Just wish I'd started younger investing like a rich person!

[justthisbloke]

I find the combined household assets to be over 2 million according to your methodology so have ticked that box. But I don't believe that's indicative of what one (including I) actually need to be Fi. It's just where we've ended up. If I were single and childless I reckon £250k might even cover it if you're a happy frugalista like me.

[StainlessSteelCat]

Personally, I'm planning on receiving £0 in State Pension. A lot of bloggers/people talk of the 4% Rule to calculate how much they need. For £10,000 excluding State Pension you'd need £250,000 (£250,000/4%) plus your home. Personally, I think that is way to bullish given life expectancies vs early retirement, UK residency etc. Instead I've used Wade Pfau's research and settled on a 2.5% Rule. Under this Rule you'd need £400,000.

Of course I know nothing, DYOR etc...

Thanks that's helpful and gives me something to investigate/work with. If those more conservative figures are in any way correct, I'm maybe 3-4 years away from retiring. Most of my saving these days is into my pension.

And you're right about house price, lauralondon - if you are flexible about location - it makes sense to move to where there are cheaper house prices (leaving aside that some locations are likely cheap for reasons that make them unappealing to retirees of all ages).

[Frank Hovis]

Gah just when I'm feeling good about my situation a poll like this comes, and I'm the bottom end!

House price is really irreverent though to retirement unless your selling it, 20k house in Wales or 2 mil in Chelsea the important thing is being mortgage free.

I can assure you that when it comes to the general population you're in the top end Laura; I know several people in their fifties with debts rather than savings who have no choice but to keep working as long as they can.

And one guy in his early fifties, no dummy but forced by circumstance and daft high house prices, to find himself in a position that if mortgage rates rise, other than trivially, in the next two years then he will be wiped out financially.

Although IMO that he realises this puts him in a stronger position than many.

[Frank Hovis]

Thanks that's helpful and gives me something to investigate/work with. If those more conservative figures are in any way correct, I'm maybe 3-4 years away from retiring. Most of my saving these days is into my pension.

And you're right about house price, lauralondon - if you are flexible about location - it makes sense to move to where there are cheaper house prices (leaving aside that some locations are likely cheap for reasons that make them unappealing to retirees of all ages).

I did aim for 1% but find 2% is perfectly realistic for maintaining capital growth over inflation so I'm sure that 2.5% is equally good.

[JoeDavola]

My net investment in VCTs stands at £96925 (net of tax relief where applicable - most but not all my purchases). My income from VCTs this (calendar) year is £12670. Tax-free. Not a bad rate of return. A minority of them have proved big losers, but then so has Tesco.

And there's a nice capital gain too, though that's really just the tax relief.

Just wish I'd started younger investing like a rich person!

Am I reading that right - a return of over 10%? Bloody hell.

[justthisbloke]

Every time I looked at VCTs I was put off by the high fees and the over-salesy documentation. I know in theory they're a good tax wheeze and a valuable source of capital to business - but could not bring myself to cough up.

[Frank Hovis]

Am I reading that right - a return of over 10%? Bloody hell.

Yes, but it doesn't start at that level and it's dependent upon the limited number of ventures invested in doing well.

I like them and do not see them as the high risk investment that others do; especially once you've built up a range. They're giving me lots of dividends these days but I started investing in them ?15 years ago. I couldn't tell you the value as I see them as a tax free income stream rather than a saleable asset.

[justthisbloke]

Where and how do you invest? A link would be nice - maybe things have changed since I last looked.

[JoeDavola]

Yes, but it doesn't start at that level and it's dependent upon the limited number of ventures invested in doing well.

I like them and do not see them as the high risk investment that others do; especially once you've built up a range. They're giving me lots of dividends these days but I started investing in them ?15 years ago. I couldn't tell you the value as I see them as a tax free income stream rather than a saleable asset.

Absolutely - my 'plan' was to buy a house outright and then drip feed half my wages every month into some sort of investment until I decide to pack in work (could be 3 years or 30 years away).

Will have to look into VC as a possibility

[Frank Hovis]

Absolutely - my 'plan' was to buy a house outright and then drip feed half my wages every month into some sort of investment until I decide to pack in work (could be 3 years or 30 years away).

Will have to look into VC as a possibility

A caveat, as I think I and the miserable pig are coming over as a bit like boomers who've done well out of HPI and go round telling everybody to buy property, is that the rules were tightened this year as I have flagged on my PMs.

Now I don't know these in detail (I will read before I put any more in) but I get the impression that the effect is to make them more of a proper "venture" rather than the one-way bet they pretty much have been. Investing in smaller cos at an earlier stage rather than just piggy-backing an existing successful portfolio.

I know people always say this but this year in particular for VCTs I do very much mean DYOR.

I wouldn't want to be responsible for another Guitarman scenario where, egged on by the goldbugs that he couldn't lose, he put his limited funds into gold at $1,900 before it started its collapse.

I also got the impression that similar happened to 'Bart' who was heavily into metals for the same reason.

[porca misèria]

Yes, but it doesn't start at that level and it's dependent upon the limited number of ventures invested in doing well.

I like them and do not see them as the high risk investment that others do; especially once you've built up a range. They're giving me lots of dividends these days but I started investing in them ?15 years ago. I couldn't tell you the value as I see them as a tax free income stream rather than a saleable asset.

I couldn't tell you the value accurately, but I do have a spreadsheet that gives me a value column by importing it from Yahoo finance. Treat with caution, because in the less-liquid funds it can be over-optimistic by some significant margin.

I am now trading them, selling as well as buying. I will flog off some this year just to balance new purchases for eggs-and-baskets reasons.

Am I reading that right - a return of over 10%? Bloody hell.

The figures I quoted are a b***** brilliant year's dividends. But then, so were 2014, and 2013 when the divis first covered my rent in full. I don't expect the boom times to last forever, and sometime will come the famine to follow the feast.

A caveat, as I think I and the miserable pig are coming over as a bit like boomers who've done well out of HPI and go round telling everybody to buy property, is that the rules were tightened this year as I have flagged on my PMs.

Now I don't know these in detail (I will read before I put any more in) but I get the impression that the effect is to make them more of a proper "venture" rather than the one-way bet they pretty much have been. Investing in smaller cos at an earlier stage rather than just piggy-backing an existing successful portfolio.

Yep. Some managers had substantially de-risked it by focussing heavily on management buy-out and buy-ins of profitable small biz. Government has just decreed that (new investments in) those no longer qualify for the tax breaks. That will hit many but not all of the best performers of recent years. Look for discussion of the issue in an offer's prospectus: if a manager has reviewed its investments and says something like "just 2 of our last 20 investments could've been affected by the new rules" they're good. If they say "... need to review and adapt our investment policies ...", treat with more caution!

[edit to add] Very simple overview of the changes: http://www.hl.co.uk/news/articles/changes-to-vct-legislation .

[winkie]

If I were going to suggest a ballpark figure or scenario I would aim to have a home that requires no rent or debt to pay against it only tax and maintenance .....see to it that both taxes and maintenance are as low as possible.....the home has to be in a safe and secure place with good laws protected property rights and good infrastructure.....a kindly and close community also counts for a lot.....each look out for each other.

So as an individual £10k per year guaranteed income, two supportive people with £10k each better still........and a sum of money depending on age and expectations to cover for general stuff over and above general living costs that come along if and when......some of that low risk, low reward some slightly higher risk higher reward all depending on individual circumstances.......we are all different, we all expect different lifestyles and we all have a different number of years ahead of us....therefore there is no right number....each to their own game plan.